Puerto Rico Power authority restructuring plan to aim at consensus-Donahue

Reuters Staff

3 Min Read

SAN JUAN, Puerto Rico, Sept 17 (Reuters) - Puerto Rico Electric Power Authority’s new chief restructuring officer Lisa Donahue said on Wednesday that she is confident of developing a restructuring plan that will have the support of all stakeholders at the embattled government power utility.

In her second week on the job, Donahue has met with Governor Alejandro García Padilla, and her 10-member team is working with PREPA’s IT department to “enhance the availability of data” - long a gripe with investors.

They are also taking a hard look at fuel options as they get to grips with operations at the sprawling public utility, which relies on costly oil shipments to generate power.

Donahue said it was too early to give specifics on the restructuring plan, such as whether it would involve job cuts, electricity price hikes, privatization, or a write-down for bondholders, reiterating an earlier position she took in an interview with Reuters on Sept. 5.

“I feel we are going to get a deal down. That’s what people expect and that’s what I expect,” Donahue said. “There are certain deliverables that are required, with certain deadlines and timelines of what needs to be provided. It’s very early days. Part of my job is to try to understand the possible.”

Her comments on Wednesday were made in her first meeting with reporters on the island since taking over at PREPA on Sept 8.

Donahue, a restructuring expert at Alix Partners, was hired by PREPA, which is struggling with over $9 billion in total debt. The utility entered into a forbearance agreement with a majority of its bondholders in August.

Donahue may find her room for maneuver limited. Both PREPA’s main union UTIER and the governor have said they would not support raising rates, firing employees or privatization. Donahue’s actions are subject to approval by PREPA’s board, which is dominated by government appointees.

“I am aware of what everyone says about the political situation I have not yet seen an issue at all. I have not been interfered with in any way. I have gotten the information we have asked for. People are hopeful and want to make the best of the situation,” she said.

Moody’s downgraded PREPA’s $8.8 billion of revenue bonds further into junk on Wednesday, highlighting the political obstacles to restructuring operations.

“Any restructuring proposal will be influenced, to some degree, by the commonwealth’s politics, particularly given the weakened and lackluster state of the Puerto Rico economy,” Moody’s said.

Moody’s said it was “highly likely” bondholders would be forced to take losses and put the recovery rate for the bonds at 65 percent to 80 percent. Moody’s cut its ratings on the bonds to ‘Caa3’ from ‘Caa2’. (Reporting by Reuters in San Juan; Writing by Edward Krudy; Editing by Eric Walsh)